Short-selling ban 'to be lifted'

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The Financial Services Authority (FSA) said it would let the ban expire as scheduled on January 16, ignoring pleas last week for an extension from MPs including John McFall, chairman of the Treasury Select Committee.

But the regulator said it was set to keep rules requiring the disclosure of significant "short" positions for an extra six months, until June 30, in an effort to help troubled stock markets.

And it pledged to reinstate the ban if it saw fit.

Short-selling is when investors, typically hedge funds, borrow shares in a company which they then sell in the hope of buying them back later at a lower price.

The FSA introduced a temporary ban on the practice for 34 financial stocks in September last year due to the financial turmoil in the markets.

Its decision follows a consultation process on the rules, which officially closes on Friday.

The FSA has already scrapped rules requiring daily disclosure on short positions, after the initial 30-day consultation in October.

It also said it will further amend the disclosure rules, now requiring firms to disclose only when existing short positions reach certain thresholds, at 0.1% bands - such as 0.35%, 0.45% and 0.55%.

However, the FSA had been urged to maintain the ban, given the continuing problems in the stock market and as bank shares continue to slide.